Technical Analysis of RAPID

I like to joke around comparing Technical Analysis (TA) = reading tea leaves.  (no offence to TA traders)
- It's not to downplay the value of TA.  I actually use TA a lot personally and it works for me.
- The joking is to remind me that TA is not "full proof" like owning a profitable and growing EPS business over the long term, the kind of thinking that Warren Buffett employs.

Warren Buffett and Charlie Munger's views on RAPID?

How would Buffett and Munger would view RAPID?  I can't ask them this question directly of course, but over the past 2-3 decades, I have been an avid follower, reader, viewer, etc. of Buffett and Munger's thoughts, sharing, etc on their strategy and here's my take.   In the case of RAPID, I am pretty sure Warren Buffett and the late Charlie Munger would never consider owning this stock in a second.

Why?  There are just so many businesses with better quality.   Buffett is a believer to limit the number of investment decisions in your lifetime, so that you are extremely careful not to make them frivolously.  You would study them, compare them carefully against other alternatives, like what you might do when choosing a person to marry for the rest of your life, or what you might do before entering into a long term business commitment that would last a lifetime.  He would not waste it on RAPID.  It is quite clear that RAPID is not a business which has an economic moat, a business where both can be assured or "virtually certain" that its future earnings prospects 5, 10, 20 years from now will clearly higher from today.  

Benjamin Graham's views?

I think Graham might consider owning this stock for 2-3 years as part of his highly diversified value portfolio.  This is because its NTA is RM1.61, almost doubling the current market price, which in his view can provide an adequate "Margin of Safety" (his typical ratio is P/BV of 0.7, but he may apply other additional tests that I haven't applied here).   His reason to give 2-3 years is to let market come back to its senses.  Either that or future NTA gets a haircut.  He acknowledged that 2-3 years is no guarantee and to avoid owning lagging stocks, he recommend to sell after 3 years if price hasn't moved back up to its NTA, and move on to other stocks.

His strategy is not bad.  Academia has studied his strategy for many years and discovered that over the long term (like say 50 years), Value Investing beats market performance.

Like Warren Buffett, I cannot recommend more highly than him to study Graham's "Intelligent Investor" book, a book that shaped his thinking for many decades.

My Tea Leaf Update

I don't believe in using TA indicators like MACD, RSI, CCI, BB, or any other TA initials.  Instead, I prefer to focus on the "Market Psychology" which is based 100% on pure price action, so as not to lose sight of the "Big Picture".  It's the Big Picture that matters more - if you get the Big Picture right, all the other mathematical indicators will tell you the same thing (usually).

Here, we don't need to use the indicators here yet because the price action is quite obvious.

After rapidly crashing down from a high of RM29, RAPID price has been trying to find a new base since the March bottom where it hit 65.5 sen.   It bounces up rapidly on 11-12 March to hit a high of 95.5 sen, but drifted back down.  It then retested the 65.5 sen low in late April and then we see a "Bullish Engulfing" and a typical chart pattern.  Then we see a HH (Higher High) in late April and then a HL (Higher Low) in mid May.  These completes the setup for a Bullish move and anticipating this pattern (a common pattern), is when I took a risk and added 2 trades in the 60s.   

So, after May, we see a series of HH and HL Price Actions, which is also typical and because it is still in a down trend, it failed at 1.08 in mid June.  It's impossible to fully predict in advance, but it's not a surprising and so, along the way up at 88 sen, 96 sen and 1.06, I sold the portion that I bought in the 60s.  

Then, in late June, we see a HL, followed by a retest of the low 3 days later and the retest hold.  Then we see a LH (Lower High) which then completes the Box Consolidation and then we see price drifting ... this type of price action is a "box consolidation" and this type of chart pattern gets me excited because odds are good that this type of "smell" will lead to food later down the table.  Simply put, the longer it stays in this box consolidation pattern, more skilled hunters will be coming in later (some type of hunters may already be here holding small positions).  If you are a Bollinger Band trader, this is known as the "Bollinger Band Squeeze", but I don't need this indicator to tell me that - the price action says everything.   Bollinger Band Squeeze trading strategy also has good positive value trading expectancy.  Meaning you can beat the market with this type of strategy, particularly using long BB parameter values that gives a longer squeeze period.

Anyway, future price actions are never guaranteed.  No guarantee that this sideways box consolidation (shown by the blue lines between 81 sen and 89 sen) will hold.  

But as TA traders, the longer it stays inside this box, the more exciting the future hunt is going to be!  This is because of the general rule of thumb expectation that the longer the consolidation period, the longer it washes away weak hands and accumulation takes place by the stronger hands.  This is also consistent with Graham's 2-3 year observations.

Anyway, let's see.

Good luck stalking, smelling and hunting!

Disclaimer:  As always, you and you alone is fully responsible for all of your trading and investing decisions.